Cycle Time

• Author: Gerhard Plenert
• Pages: 152-154

Page 152

Time has become a key success measure in business. Oftentimes, it is more important than other performance measures. For example, in marketing a product's success or failure often depends on "time-to-market," or how quickly a new product becomes available to the customer. One of many cycle time measures used in management, cycle time is the measure of a

Page 153

business cycle from beginning to end. Production cycle time refers to production activities, such as the total time required to produce a product. Order processing cycle time is used in the front office to determine the total time required to process an order. From a financial perspective, terms like cash-to-cash cycle time describe the amount of time a company takes to recover its financial investment. From a management perspective, cycle time is used to evaluate performance in all aspects of a business.

Cycle time has become the key measurement tool for the performance of a number of leading edge management concepts, including supply chain management (SCM), just-in-time (JIT) management, enterprise resources planning (ERP), theory of constraints management, and lean management. Cycle time improvements in any of these areas have been linked to reduced costs, reduced inventories, and increased capacity. The resource areas that are measured by cycle time include the measurement of financial flow, materials flow, and information flow. In each case, a delay or failure of any of these measures would indicate a failure of the entire business process.

Cycle time is best illustrated by a few examples. In marketing, time-to-market cycle time is the critical measure of success in the fashion, apparel, and technology industries. Companies that cannot get products to market quickly may get completely washed out. Time-to-market is the measure of time from idea inception through idea development, design and engineering, pilot, and finally production and customer availability. For example, the United States led the world in the idea phase of automotive air bag development. However, a slow design and engineering process enabled the Japanese to generally offer airbags in their vehicles several years before the United States.

Another example of cycle time is the production cycle time. This is the time from when an order is released on the production floor until completion and shipment to the customer. For the American automobile manufacturer this time is measured...